New Guidelines for Good Practice on The Substantial Change Exemption in Rent Pressure Zone Areas

The Residential Tenancies Board on Thursday 23 November 2017 published new guidelines for good practice on substantial change exemption in rent pressure zone areas. This guideline sets out what will constitute “substantial change” and “substantial refurbishment” for the purpose of the Residential Tenancies Acts in rent pressure zones. The background to this change is that there is a concern that a small number of landlords are attempting to circumnavigate the 4% rent cap by using the refurbishment clause in Section 34 of the Residential Tenancies Act to obtain vacant possession and re-let the properties at higher rents.

The Guide states:-

In general works that would be regarded as part of on-going maintenance and upkeep of a property or works undertaken to bring a property up to meet minimum letting standards may not be relied upon when seeking an exemption from rent pressure zone rent restrictions.

Outside of rent pressure zones the rent may only be reviewed every two years unless there is a substantial change to the property which would justify a higher rent.

The guidance note states that a complete modernisation of a property which includes a combination of works may permit a landlord to obtain vacant possession of a property.

The guidance note sets out that the proposed alterations to a dwelling must be of such a kind and extent that they would have a “significant effect” on the letting value of the dwelling, if the landlord is to obtain vacant possession of the property.

The guidance note sets out that in order to qualify for an exemption, a landlord should be in a position to prove

a change in the nature of the accommodation

it should be substantial or significant

and that the market rent for the property would be different as a result of this change.

The guidance note sets out that certification from an architect or structural engineer may be useful, and we recommend that this certificate should be obtained if a landlord wishes to obtain vacant possession of a property.

The guidance note sets out a number of case study scenarios which examine:-

whether the works are over and above the landlords statutory obligations;

the amount of expenditure incurred and

whether the property has been structurally altered.

These are the type of tests which are applicable and which a landlord should satisfy where vacant possession is sought.

Overall, the guidance note seeks to restrict minor incidental works such as upgrading of a kitchen or a bathroom, painting and decoration, being used as a means to justify a landlord seeking vacant possession of a property.

If the property is refurbished and available for re-let within 6 months of the termination date, it must be offered for letting back to the original tenant.

For more information on this guidance note or the Residential Tenancies Acts generally please contact Setanta Landers at slanders@reddycharlton.ie